Reader riposte: Global food markets

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Steve Grenville rightly argues that sharp rises in global food prices, now hitting the poor in developing countries, are an urgent global policy issue. It's worth noting that the immediate problem – like so many other important problems (the global financial crisis, world energy prices) – relates to the operation of markets. In fact, it's surprising how important markets are. It is hardly possible to discuss the issue of rocketing food prices without considering the range of markets that are involved. One of the best books written about markets recently is by John McMillan, Reinventing the Bazaar: A Natural History of Markets.

So what can be done about global food markets? Grenville calls for intervention (or, helpfully, a reduction in intervention) in ethanol markets, especially in the US. This would certainly help although, doubtless, it will be difficult for Australia to muster the political clout to have much impact in the US. Unfortunately (and I can say this because not many hungry people will be reading this blog), there is not a lot that can be done in the short term. More money for the World Food Programme would also be useful, but the WFP can only redistribute the stock of food that currently exists in the world.

Fashions in foreign aid come and go. One of the fashions in the international foreign aid community in recent decades has been to give less priority to agriculture than was the case in the 1970s and 1980s. During the 1990s and into the new century, global foreign aid attention to agriculture dropped off markedly. The chickens born from this change in foreign aid priorities are now coming home to roost. What the chickens will find is that, first, there is less food for them to eat, and second, it's going to take time for markets to adjust to the new reality.